5 Transportation Industry Tax & Payroll Credits

Dec 3, 2020Transportation

Are you confident you are doing everything to minimize taxes for your transportation company? One of the best ways to reduce tax liability is to ensure you claim all tax credits available. This article provides an overview of popular tax and payroll credits available to the transportation industry.

Popular Tax Credits for Transportation Companies

Fuel Tax Credit

Transportation companies may be eligible to receive a credit for tax paid on fuel. Nontaxable fuel uses include off-highway business use, local buses, school buses, diesel, and propane fuel. The credit can be up to 50 cents per gallon and is claimed on Form 4136 on your company’s tax return. You can still claim the refundable credit for previous years.

Research & Development Tax Credit

The transportation industry may not be the first to come to mind when people think about research and development (R&D). However, the stereotype that transportation companies have little to no innovative processes certainly does not hold true today. The transportation industry is extensive and innovative. To meet the growing population’s needs, transportation companies are developing innovative ways of transporting more people and goods faster, safer, and cheaper than previous generations. Federal and state R&D tax credits are available to support these innovative efforts. Businesses may take credit up to 13% of eligible spending for new and improved products and processes.

Work Opportunity Tax Credit

Hiring people from targeted categories and employing them for at least 120 hours may qualify your transportation company for the Work Opportunity Tax Credit. The new hire must fall into one of the following groups: 

  • Veterans
  • Long-term unemployed
  • Food stamp recipient
  • Summer youth
  • TANF (Temporary Assistance for Needy Families) recipients 
  • Designated community residents
  • Vocational rehabilitation referral
  • Ex-felons
  • Supplemental security income recipients

This program was set to expire in 2019 but is extended for one year to December 31, 2020.  

Empowerment Zone Employment Credit

The Taxpayer Certainty and Disaster Tax Relief Act of 2019 renewed the Federal Empowerment Zones, which had previously expired at the end of 2017. The Empowerment Zone Employment Credit is retroactively extended for qualified zones wages paid or incurred in 2018, 2019, and 2020. This credit provides an incentive to hire individuals who live and work in a federally designated empowerment zone. This is a wage credit of up to $3,000 for each employee.

Supporting your Transportation Business Through COVID-19

There is an abundance of tax-saving opportunities available to transportation industry business owners that extend beyond what is listed above. We can help you identify all credits you may be eligible for. Smith Schafer has 50 years of experience helping transportation companies effectively manage taxes, credits, and deductions. 


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